COLUMBUS, Ohio — The Ohio Supreme Court has ruled in favor of the Cheeks gentleman’s club in Miamisburg, finding that the Ohio Liquor Commission does not have authority under state law to suspend the club’s license stemming from the felony conviction of a former employee.

“The Ohio Liquor Commission does not have authority under R.C. 4301.25(A)(1) to suspend or revoke a permit holder’s liquor permit when a former employee of the permit holder is convicted of a felony for an act committed while employed by the permit holder,” wrote Justice Maureen O’Connor in the majority opinion issued this week.

Attorney Jeffrey Douglas, chairman of the Free Speech Coalition, told XBIZ that the decision was an unfortunately rare example of a court applying the same standard to an adult business that it does to non-adult operations.

“Most striking here is that the court treated an adult business like it would any other business,” Douglas said. “In the current environment — sadly — that fact is headline material, in itself.”

The case stemmed from incidents in that took place in February 2003, when detectives from the Montgomery County Sheriff’s Office conducted undercover drug buys at the club. According to court documents, the detectives made two separate purchases of cocaine from a dancer named Brooke Orshoski.

The club fired Orshoski the same month. She was subsequently indicted and later convicted on felony drug trafficking charges in October, 2003.

In January 2004, the Ohio Liquor Control Commission (OLCC) cited WCI Inc., the company that owns and operates Cheeks, for liquor license violations based in part on Orshoski’s felony conviction.

The OLCC held a hearing in May 2004 regarding Orshoski’s violation, at which WCI’s manager testified that he terminated the dancer’s employment before she had even been convicted of the crime, because he suspected that she was using or dealing drugs from within the club.

Despite that fact, the OLCC suspended WCI’s liquor permit for 30 days, stating that under the commission’s interpretation of state law, it was irrelevant whether or not the club still employed the dancer at the time of her conviction.

WCI appealed that decision, eventually leading to the state’s highest court hearing the matter.

In its appeal, WCI contended that because the company terminated Orshoski well before her conviction in October 2003, the OLCC lacked authority under the statute to suspend the company’s permit.

“We agree with WCI and the opinion of the court of appeals in this case,” O’Connor wrote in the decision issued this week. “These opinions are grounded in the recognition that [the statute] is unambiguous and that under the plain meaning of the statute, the conviction must occur during the employee’s employment with the permit holder. By its plain terms, the statute does not address a conviction of a former employee of a permit holder.”

O’Connor stated that while it is “well settled that a liquor permit does not create a property right subject to traditional due process, it would be unfair not to recognize that this particular permit holder terminated its employee upon learning of her criminal conduct — likely in an effort to protect its own interest as well as its patrons.”

“If we were to adopt the commission’s position…. we would be placing the future of an establishment’s liquor permit in the hands of the employee and the employee’s defense counsel,” O’Connor added.

In his dissent to the majority’s opinion, Justice Robert Cupp argued that the court’s ruling “renders the statute essentially meaningless.”

“As the commission argued before this court, reading the statute to require that the conviction and employment must be concurrent will allow a permit holder to easily evade its responsibility to maintain a permit premises free of illegal employee activity,” Cupp wrote. “A permit holder who knows of, or should know of, felonious employee conduct will now be able to allow the conduct to continue until the employee is caught. Then, the permit holder can insulate itself from any consequences simply by firing the employee before he or she is convicted.”

Douglas told XBIZ that the problem with Cupp’s argument is that it “is taking the approach of ‘guilty until proven innocent.’”

“The dissent assumes a conspiracy between the club and its employee,” Douglas said. “As far as the dissent is concerned, that conspiracy is fact, despite there being no evidence to support that position.”

Another point the dissent may have missed, Douglas said, is that to punish clubs regardless of whether they act to terminate problem employees would have the opposite of the statute’s desired deterrent effect.

“The majority correctly rejected a strict liability standard, and created an incentive for clubs to behave responsibly,” Douglas said. “If you get punished either way, that creates a disincentive to behave responsibly.”

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The Ohio Supreme Court has ruled in favor of the Cheeks gentleman’s club in Miamisburg, finding that the Ohio Liquor Commission does not have authority under state law to suspend the club’s license stemming from the felony conviction of a former employee.
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